Looking at the business

[Rogerwilco]

I have been looking to get into the cattle business for a while and I was wanting to ask for impressions from a more experienced group of people. I have been around cattle because my family has cattle, but I am not in line to inherit land or money, and nobody has invited me to join them in a cattle venture, but that's fine.
I am looking at the business in it's simplest form with a minimal outlay in cash. From what I can tell that might be buying a bunch of steers after they are weaned and feeding them to a higher weight and selling them. That sounds simple enough. Without having to own any land it looks like this, to me.
Initial cost of livestick: about $650
Sale price of livestock: about $1000
Expenses necessary for this kind of weight gain would include transportation, pasture lease and feeding if necessary, veterinary care and interest on the loan at about $120-150 per head. So, in an average year, without catastrophic conditions, what it seems we are talking about is a Net profit of about $200 per animal. That is a 20% profit on our $800 investment. i am not including the value of your time, depreciation on vehicles and genteral cost of running a business.

I understand that this is a simplified model, but does this sound like an accurate description of this business? If not, what kind of margins can an average producer with minimal overhead expect?

 

[MikeC]

Feeders are losing $100 to $150 per head at this time.

The price of feeder cattle is about to fall like a rock. Be careful.

Start small, learn the business, and grow your way into it.

It will only take you about 10-15 years.

You might be better off going to Vegas.

 

[3MR]

Your going to have to get them a lot cheaper than 650 a head. Right now will probably be a hard time finding a lease pasture as well if you are in a drought area.

 

[Anonymous]

if you've got family in the cattle business then i'd sit down with them and discuss it...if they live around you, they will know what's going on with prices around your area...as NewbieFarmer said...it would probably make you more money running a cow calf operation...but that gets a lot more complicated also...there's a lot more work you have to put into a cow calf operation...how many cattle are you planning on running anyways?...and I notice how you said " without catastrophic conditions"...well i'll be the first to tell you that the numbers you figure out on paper are not the ones that come out at the bank...I dont know what you'd consider catastrophic conditions but usually nothing goes the way you expect it to in the cattle business...so I would just assume i'd start out and make some money...but I know a few people who have started out just to make a few extra dollars...and they eneded up losing money...so be careful and ask around your area before you go and start buying them

 

[Anonymous]

Excellent post heritage. I would also like to add that the first thing you should be figuring is your facilities. If you own cattle they will get sick eventually it is inevitable. You must have good facilities with which to pen them and vaccinate them and weigh them. If you do not have good facilities then the catostraphic conditions you mentioned are more likely to happen.

That's the biggest problem most people have...they start buying cattle before they have everything they need to run a good profitable cattle business...I believe Rogerwilco may be thinking too much about the money and not enough about what it takes to run cattle...but that's what these boards are for...so you don't make that mistake

 

[Rogerwilco]

Good answers, thanks.
I am not so hung up on the money as to be blind to the facts. I just want to know what kind of buinsess producing cattle is. If there were no profit possible then the business would not exist, so whatever is making feeders lose $100 a head is probably not a permanent condition. The numbers that you start with are never quite what you would expect them to be. It's the same in every business. There is usually a time up front where it is difficult to earn a justifyable profit, but that is just part of the cost of going into business. If it were all handling cattle and you didn't have to actually manage a business to make a profit then everybody would do it. Don't anybody worry, I'm not planning on buying any cattle this year. Maybe not next year, but maybe so. The key is to make good decisions as to how your business will be conducted and to make those decisions as early as possible, preferably before you start spending money. That way you will be best prepared for problems. A good decision, for example, might be to start with ten or less animals.
Perhaps we could discuss what kind of effort is involved in running feeder cattle and making a profit.

My notion is that feeders is a good business because you don't need nearly as much equipment as other operations, and you don't need to own land at all if you can lease it. Is that a correct notion?
Who is making money doing this and why are they profitable?
Who is losing money "...
What kind of facility do most people feel is necessary?
Can you "spread out" the operation, putting some cattle here and others there and such? It would be nice to own ones own ranch, but I don't.

Thanks again.

 

[MikeC]

Just go into it with your eyes wide open Roger.

The more experienced guys who have their places and equipment paid for can top a newcomer 10 out of 10 times.

 

[Gr8 Lashay]

now now people... what are your favorite places to travel to?

 

[3MR]

I wouuldnt worry about the answers you got not being to the question you asked. Everybody who asks a a question here about starting up gets the same answer about facilities regardless of the question.

Its good advice, but still doesnt answer the question.

Im not sure what you mean by it will take less equipment to run feeders than anything else. Handeling cattle is handleing cattle and you will really need the same equipment.

YOu can also lease land for any type of operation. Many producers do, especially with the cost of land these days.

You have to look at the margins to make money feeding. Right now the margins are very tight so unless you have a hook, ie: free pasture, very low cost animals or feed, that nobody else is getting then its going to be hard to imposiible to make any money.

Your going to get all kinds of answers about the equipment and facilities so I will lead that one alone.

Yes, You can split your operation up, but you are going to raise your expenses considerably in doing so.

IM sure you will get much more detailed answers from people on all these questions.

 

[Anonymous]

I wouuldnt worry about the answers you got not being to the question you asked. Everybody who asks a a question here about starting up gets the same answer about facilities regardless of the question.

Its good advice, but still doesnt answer the question.

Im not sure what you mean by it will take less equipment to run feeders than anything else. Handeling cattle is handleing cattle and you will really need the same equipment.

YOu can also lease land for any type of operation. Many producers do, especially with the cost of land these days.

You have to look at the margins to make money feeding. Right now the margins are very tight so unless you have a hook, ie: free pasture, very low cost animals or feed, that nobody else is getting then its going to be hard to imposiible to make any money.

Your going to get all kinds of answers about the equipment and facilities so I will lead that one alone.

Yes, You can split your operation up, but you are going to raise your expenses considerably in doing so.

IM sure you will get much more detailed answers from people on all these questions.

well he's asking about how much money we think he will make...if he starts before he does have solid facilities and everything planned out...then more likely than not...he will end up losing money...like I said...the numbers on paper never turn out right...he can figure everything out on paper about the money...but if he doesn't have what he needs before he gets cattle...then he'll be in over his head sooner or later

 

[3MR]

I agree.

 

[la4angus]

If there were no profit possible then the business would not exist, so whatever is making feeders lose $100 a head is probably not a permanent condition. The numbers that you start with are never quite what you would expect them to be.

You are partially right. Whatever is making feeders loose $100.00 a head is probaly not a permnant condition. They could end up loosing $200.00 a head or maybe more.

 

[auctionboy]

As long as Roger rents a place with a pen to catch these calves he probably won't have to doctor them so he wont need a squeeze. I don't see why you have to try to scare him away from getting some feeders. A guy putting a few head on pature is different economics then a feedlot. I think he should only buy as many as he can sell a freezer beef. That way he wont have to worry about the market and can set his own prices. Also I recommened buying herefords if you sell by the side.

 

[msscamp]

As long as Roger rents a place with a pen to catch these calves he probably won't have to doctor them so he wont need a squeeze.

Even when raising your own calves, there are ALWAYS a few that need doctoring for whatever reason. This statement is completely unrealistic, in my honest opinion. Buy them from the salebarn or via private treaty and the number needing doctoring increases due to the stress of being shipped and finding themselves in strange surroundings (private treaty), and being exposed to bugs they have no immunity to(salebarn) and then being shipped yet again, only to find themselves in strange surroundings.

I don't see why you have to try to scare him away from getting some feeders.

Who's trying to scare him away? Facts are facts, and it is a proven fact that stress increases the chance of illness.

I think he should only buy as many as he can sell a freezer beef. That way he wont have to worry about the market and can set his own prices.

What if there is no market for freezer beef in his area? Another factor is that Madame Housewife generally does not buy freezer beef from an unknown source for obvious reasons. Then there is the possibility that maybe he isn't interested in getting into this market. Even when selling freezer beef it's a competitive market because people can always buy beef at the local supermarket or from another source - one has to have one helluva reputation before they can 'set their own price' in any business!

 

[Rogerwilco]

I wouuldnt worry about the answers you got not being to the question you asked. Everybody who asks a a question here about starting up gets the same answer about facilities regardless of the question.

Its good advice, but still doesnt answer the question.

Thanks 3MR
No it doesn't answer the question, but the cattle business is not the only business that requires tight margins, adequate capitalization and that involves risk. That's not new at all. I guess everybody has "facilities" on their mind because just about everybody has been blindsided by a major expense at an inconvenient time so it's understandable that it comes up so fast. And I suppose I can go to the State University library or book store and find a big fat $100 text book about beef production that will answer the rest of my questions but I was hoping to get a bit of insight about what kind of long term profitability can be expected in the business from current producers.

Thanks anyway.

 

[auctionboy]

Well msscamp when the supermarket lowers there prices you call me. As for selling the sides or quarters that would relly on his salesmanship, advirtising, and local market. Also stop responding to everything I type on here with your egocentric views. I can't be wrong about everything!!!

 

[msscamp]

Also stop responding to everything I type on here with your egocentric views. I can't be wrong about everything!!!

Why not? You're human, aren't you? Perhaps you should consider speaking with your doctor about those seemingly paranoid tendencies because, I assure you, I'm not looking for your posts.

 

[3MR]

Keep Asking, Once they figure out you got the idea about the facilities and the inherent risks both physical and financial you will get all kinds of great answers and personal experiences.

The kind of stuff you will never find in a text book.

 

[Rogerwilco]

Keep Asking, Once they figure out you got the idea about the facilities and the inherent risks both physical and financial you will get all kinds of great answers and personal experiences.

The kind of stuff you will never find in a text book.

I guess I would have similar warnings about being a contractor. It's very hard, dirty, dangerous work and you can win or lose big on any day of your life. Otherwise, it's a pretty good business to be in. as simple as it seems, you have to treat it like the complex business it is or it will bury you.
I suppose this is similar?

 

[msscamp]

Keep Asking, Once they figure out you got the idea about the facilities and the inherent risks both physical and financial you will get all kinds of great answers and personal experiences.

The kind of stuff you will never find in a text book.

Oh, I'll keep asking - too many newbies on here that just might buy into the spiel without doing their homework and get burned very badly because of it. ;-) I guess if my questions garner that type of response, so be it. Cie la vie! I hope that is spelled right. Thanks, 3MR.